1) Gap will no longer spin-off Old Navy— a move that calls into question the future of both brands and their ability to stand out in today’s competitive landscape.

WHAT HAPPENED: The moves comes after three-quarters of slowing sales—ranging from one to five percent year-over-year. Old Navy attributes its sales decline to a lack of investment in high-performing product categories like denim.

WHY IT MATTERS

  • While investing in an on-trend product assortment is important, training shoppers to expect promotions is more damaging. Up until this point, Old Navy’s low-priced, trendy clothing has enabled the brand to avoid heavy promotions. But the company’s decision to grow its store count (It opened 75 stores in 2019) means it has to produce more products, which means more room for inventory mistakes. While the brand turned to sales to move unwanted inventory, once Old Navy became reliant on promotions it was too late to convince customers to go back to buying full-price.
  • Gap Inc.’s move to apply its formula to Old Navy led the latter brand astray, leading to the same problems that sunk Gap. Old Navy always had a distinct identity—Gap’s fun and progressive younger sister, with trendy products and celebrity brand ambassadors like Amy Poehler and Neil Patrick Harris. Ensuring Old Navy was entirely independent of Gap was a good idea, which gave the brand room to grow. But in a turbulent retail environment, applying Gap’s formula—doubling its store count, being too conservative with product design and being too aggressive with sales—washed Old Navy’s “secret sauce” down the drain. To get back to its roots, Old Navy needs to regain the independence that made it great in the first place.

2) Starbucks will open 85 stores in under-served areas by 2025, which could inspire its competitors to give back and focus on employee advancement.

WHAT HAPPENED: Starbucks will hire local staff and construction companies to build the stores and will partner with United Way chapters to develop youth job training and mentoring programs. The community stores will have the same menu as regular stores but with a slight price variance depending on the location. Starbucks launched its first community store in Ferguson, MO in 2015.

WHY IT MATTERS

  • Starbucks’ purpose-driven approach can inspire other restaurant chains to direct attention to under-served communities. Starbucks is already known for its employee development programs, which include free tuition for online college courses and scholarship opportunities, in addition to mental health partnerships with companies like Headspace. But if these community stores are successful, Starbucks competitors will have to follow their lead and branch out well beyond the wealthiest zip codes and enhance its employee training and education programs as well. Shake Shack, for example, recently announced a four-day workweek for managers at one-third of its locations in order to improve employee retention— proof that while Starbucks has been a leader for many years, the bar keeps getting higher.
  • Starbucks would make a bigger impact on these communities by focusing explicitly on job creation. While these stores will create more local jobs, and mentorship and job training give workers some transferable skills, barista positions will not lead to long-term career growth. Because of this, some community members want Starbucks to create manufacturing jobs or establish trade schools that focus more exclusively on skills that workers can apply outside of the service industry.

3) Bose will close all of its U.S. stores, as Amazon’s domination over the smart home has pushed legacy players to the sidelines.

WHAT HAPPENED: Bose will close 119 stores across North America, Europe, Japan and Australia. 130 stores will stay open in China, the United Arab Emirates, India and South Korea.

WHY IT MATTERS

  • The rise of Smart Home products has sent Sonos and Bose into a tailspin as the legacy brands’ product offerings were too dated and expensive. Amazon sold over 100 million Alexa-powered products in 2019, making the ecommerce giant the majority leader of smart home devices in the U.S. with ownership over 70% of the market. As Amazon continues to launch new products in this category at reasonable prices, it has made it immensely challenging for legacy players like Sonos and Bose to compete. Both have consumers that are less comfortable paying a premium for high-end audio when cheaper, good-enough technology is available everywhere. And since Amazon isn’t focused on making money from these devices—it sells them at cost—Amazon has a huge advantage over every other brand that has to earn a healthy margin on its products.
  • Although Bose will maintain its physical retail presence in the U.S. through wholesale, its signature products no longer stand out in this environment. It was Bose’s owned-and-operated retail stores that allowed it to differentiate itself in-store while giving customers a more upscale experience. With wholesale partners like Best Buy, Target and Apple, its signature products have to compete with everything else in the category and the staff doesn’t have the knowledge to convince a shopper to buy Bose over another brand. Apple, once a key retailer for Bose, is more concerned with selling Beats products (which it owns) than a third-party brand like Bose. Finally, consumers are more interested in products that allow everyday use such as Apple’s airpods than higher-end models, further increasing competition for the same group of customers.

4) Rent the Runway will launch a brand made from recycled materials, a marketing strategy that benefits the company more than the environment.

WHAT HAPPENED: Rent the Runway will partner with an unnamed influencer to launch a clothing brand this spring, marking one of the first times the platform has created its own brand.

WHY IT MATTERS

  • Rent the Runway’s decision to launch a brand from recycled materials is a greenwashing campaign more than an environment-first strategy. When it comes to sustainability, Rent the Runway should be more concerned about its core business model—dry cleaning, packaging and shipping—than the clothing itself. While Rent the Runway is incentivized to create a private label based on its ability to use consumer data to quickly launch best-selling products, it should instead ensure its current product offering from third-party brands strongly represents sustainability while simultaneously looking for innovative ways to reduce its own carbon footprint.
  • The rental company should focus on its operational issues instead of creating more products. Rent the Runway continues to introduce new features that will enhance the value of its membership and attract more customers to join the platform. It created more drop-box locations, launched partnerships with retailers and hotels and most recently announced its partnership with Nordstrom Rack to sell gently-used rental items in select stores. The brand is covering all of its bases to perpetuate its growth, but after its warehouse fiasco this summer, Rent the Runway should focus on stabilizing its core business from problems caused by rapid growth.